2/16/2009     Taxpayers now are the biggest owners of Bank of America (6%)
         and CitiGroup (7.8%).  Serving the interests of its biggest corporate
         campaign contributors, Wall Street and Goldman Sachs, in particular,
         the Obama administration wants to create a "bad" bank to buy the
         "toxic" loans that banks made when they greedily arranged loans
         on the assumption that housing prices could only keep rising.  Why
         did these banks make such a foolish assumption?  Greed.  Pure
         and simple.  Their big bonuses required this leap of faith.  When
         the housing bubble broke, the insiders at CitiGroup and Bank of
         America quickly sold millions of shares of their stock.  They knew
         exactly what they were doing.

               Now the bank executives, so used to giving commands and
         living an unreal life of unsustainable wealth, where 1% of the
         US population owns 50% of the country's wealth, must learn to
         take commands from the Government, instead of bossing them
         around.  They must learn to live like mere mortals, despite the
         fact that their banks will likely need two trillion more to ride out
         the gathering depression.  This is a sum that only the Government
         has.  Bankers refuse to acknowledge the high likelihood of
         falling house prices for another year or more.  Housing prices
         are probably still over-extended by 20%, of they simply
         revert back to the mean of their longer term trand.

               The biggest bankers still do not get it.  Americans blame them
         for the mess we are all in.  They reject, 20:1 the concept of
         "socialism for the rich".   Naturally, these bankers and their
         minions at Barrons and Treasury Secretary Geithner, decry
         the obvious, nationalization.  They still think a taxpayer bailout that
         assumes all the risk while the bankers get all the rewards in a
         recovery is their brithright.  How absurd!  Until these misconceptions
         are dispelled,  Main Street will suffer and Wall Street will flounder
         around without finding a bottom.   

    2/16/2009  NATIONALIZE THE BIG BANKS.   People who don't like
        the word "socialism", should reconsider it.   Nationalizing
        the "bad" banks is the cheapest alternative now.  It is now
        necessary to avoid a Depression.  A DJI break below 7400 will
        probably start a new stock market free-fall.   That will bring
        a whole new wave of layoffs and forced selling.   The forces
        of Deflation cannot be corrected until people have jobs again.
        A nationalized bank can extend needed credit and make needed
        loans to businesses.  Banks will not in this environment.  They
        will become still harder pressed by a new wave of bankruptcies
        and foreclosures.

               If CitiGroup and Bank of America were nationalized, lending
        could then be started immediately.  A strong recovery will start
        sooner.  The Stock Market will stop falling.  Later, the nationalized
        banks can be broken up and privatized when the economy is
        back on a firm footing.  Doing another TARP-II and then a
        trillion dollar TARP-III and TARP-IV as Geithner wants will
        not solve the basic problems: 1) that the biggest banks are
        badly run, 2) that housing prices are still too high and the
        government can't and should not prop them up and 3) Obama
        continues to rely upon advice from the very people (Geithner,
        Summers and Bernanke that caused this mess.

                     The SP-500 turned down today very sharply.
        Geithner's new bank-bailout plan is not seen by Wall Street
        as a solution.  $2 trillion dollars is what Geithner says the banks
        may need to be "stabalized". 



                              Don't Reward Reckless Ineptitude

               Eighteen billion went to bonuses on Wall Street in 2008,
        a disastrous year for investors.  Many of these banks got billions
        from TARP-1 under Paulson. Why reward incompetence?  These
        people are lucky to still have jobs after their terrible performance.
        Who says that incomptents can survive more easily in a public
        job?

               America has had socialism for the rich for a long time.  One
        percent owning 50% is the result.  The government must help
        everyone.    Government is not a "barren whore" and private
        jobs are no better than jobs working in public health,  a library or
        a school.  Building safe roads, bridges and dams is every bit
        as honorable as sitting around a board room and scheming how
        to charge 25% interest rates on someone of very modest income.

              It was the unregulated excesses of "free markets" that have
        proven most expensive. It is wrong, plain wrong, to give the
        bankers who caused this mess any more money.   $500,000/year
        pay is still far too high for the miscreants who made this mess.
    
             Geithner and Bernanke are talking about another two  or even
        three dollars in private/tax payer bailouts for private banks to prevent
        "systemic failure".  The private bank model has already failed.
        There are a lot more banks that will go bust.   Bailing them
        all out is UNFAIR and REWARDS GREEDY INCOMPETENCE.
        Guaranteeing their bad loans is just plain "BAD".

                  Obama and Gethner dread the word "nationalize".  Nobel prize
        winning economist Paul Krugman says the "Obama administration
        is tying itself in knows to avoid this outcome." His Wall Street
        campaign contributors did paid him not to do this.  Obama has
        said the US is not Sweden.  (Really.   He said this.)  "Obama said
        many banks are well managed and shouldn't be treated the
        same way as banks that need government assistance. "JPMorgan
        being a good example," Obama said. "Jamie Dimon, the CEO there...
        I don't think he should be punished for doing a pretty good job
        managing an enormous portfolio."  Obama may mean that a
        a national bank would have an unfair advantage over other banks.
        But he is vague and evasive.  A national bank would, at least,
        have the advantage of being able to make needed loans, be
        transparent, more easily regulated and do away with wasteful
        extravagance.

               Garry Evans, a chief Asian equity strategist with HSBC in Hong Kong, called the plan
             "muddled." He said the government was skirting around what many investors have already
              concluded: that the U.S. may have to nationalize the banks for a period...They (U.S. officials)
              have still philosophically backed away from the ultimate conclusion, which is the government
              will have to take over financial institutions," he said. "Philosophically that's quite hard for
              the U.S. government to admit, but the history of banking crises shows that is what governments
              usually do."

               Can the US afford badly run banks and vastly overpaid
        executives?   When CitiGroup and Bank of America go broke,
        the US Tax Paxer will now lose all $75 billion given to them
        by Paulson.  If Obama gives them still more, he will naturally
        not want to admit his misake, like Bush and Paulson.  That
        could easily another $75 billion lost just on these two banks.
        We already know that Paulson overpaid the banks at least
        $80 billion, according to a Congressional aud done two weeks
        ago.  In another year, the taxpayer will havve to pay for a
        TARP-III and probably a TARP-IV.   And we still would
        have no guarantee that banks will be making loans again.
        Obama could easily waste $2 trillion dollars on these banks!
        That would compare with the cost of Bush's Iraq madness.

              Why buy or guarantee the banks worthless loans? These are
        loans that no one else wants.  It would be cheaper to force
        the banks who wrote these loans in the first place to admit
        their incompetence, bear responsiblity and learn from their
        mistakes.  

             The country desperately needs a public investigation of
        what went wrong in the financial industry.   In FDR's time,
        the Senate Banking Committee unearthed a "secret history
        of the 1920s, (its) frauds, scams and abuses that culminated
        in the 1929 crash".   FDR relied heavily on the work done
        by the committe's chief counsel, Ferdinand Pecora.

            These banks are too big anyway.  If they are "too big to fail",
        they are "TOO BIG".  In his first inaugural address, FDR said:

             "True they have tried, but their efforts have been cast
           in the pattern of an outworn tradition. Faced by failure of
           credit they have proposed only the lending of more money.
           Stripped of the lure of profit by which to induce our people
           to follow their false leadership, they have resorted to
           exhortations, pleading tearfully for restored confidence.
           They know only the rules of a generation of self-seekers.
           They have no vision, and when there is no vision the people
           perish."

                                    BANK NATIONALIZATION

            If the government took the banks over a lot of good things would
        immediately follow.

               1) The new government could then immediately make
        car loans, home loans and business loans using criteria that
        are publicly transparent and reasonable.   Millions of people
        have energy and ideas.  Give them a chance and the recovery
        will begin.

              2) The stock market would then know the worst is over.
        There might be a shock.  But it would recover, knowing that that
        the steady drain caused by Bank of America and Citigroup
        on confidence and the tax payer will be over.

              3) Salaries at the nationalzed banks would immediately be
        made more reasonable.  No more billions and billions for greedy
        incompetents.

              4) When there is a recovery the banks can be split up
        and privatized if that is deemed best in four years, or so.

              5) And, of course, the taxpayer would not be stuck with
        all the worthless, toxic assets (unlimited downside risk) and
        no upside potential, when the markets eventually recover.
        In a blink, the insoluable problem of how to accurately evaluate the
        trillions in failing and falling assets (mostly the bad debts to banks)
        disappears. 

             6) Owning these debts, the government is in a better position
       to impose a moratorium on home oreclosures and the payment other
       debts it owns, if it so chooses, until there is a recovery.
           
                   See Nouriel Roubini's It Is Time to Nationalize Insolvent Banking Systems

Here is a great article:            "Never, ever feed the zombies!"        "Zombie banks beg for money. They are very clever. They come up with ways           you can give them money while pretending not to give them money, such as           guaranteeing their assets, guaranteeing new debt issues, or buying up assets at           "hold to maturity" values. Just say no! A healthy financial system cannot be run            by  zombies. "Rescuing" insolvent banks makes about as much sense as tying            string to the arms of a loved one's corpse so it can come to the dinner table as a           marionette. For a while that may be comforting (or not), but pretty soon it's sure to           smell really bad, and it's gonna ooze. If you think you have engineered a miraculous           turnaround, you have only made matters worse. An undead bank is an abomination.           It will pretend good health but hide a rot. It will afflict you, over and over and over           again, with harrowing near insolvencies (cf Citibank). Dead banks must be           allowed to die."  See more at http://www.interfluidity.com/posts/1233393659.shtml              "In my opinion people talk of "corporate governance" when they don't know what to do. I say,                taking a page from FDR's book, "We will indict and indict and convict and convict and imprison                and imprison". Once we've sent enough of our banksters to federal prisons for long terms and                gotten civil forfeitures of their assets, this nonsense will stop as the "heads I get bonuses,                tails the public bails my bank out" game will end. I suggest starting with: Fuld, Blankfein, Pandit,                Mozzillo and Rubin for a start.  (A comment by "Independent Accountant" at site just given. )

                                      

             Thoughts on Bernanke's Testimony
                     before Congress Today

                Bernanke still will not admit his own guilt in the economic collapse.  He blamed
               the "international balance of payments" for the bubble.  The weak dollar brought
               too much foreign capital into the American markets.  He refused to see that the very
               low interest rates under Greenspan caused the housing bubble.  He refused to admit
               there were regulations that he might have imposed on the banks to prevent unsafe
               loans.    He did not acknowledge that he might have tightened controls on bank
               lending and executive pay, or raised margin requirements on stock and commodity
               speculation.   His failures are clear. Why should we trust him now?  Instead, his
               unelected powers make him king of Wall Street.  He should be impeached.  But
               the Obama Administration does not believe in confrontations.  Is that leadership?  

                          See also         
                      http://economix.blogs.nytimes.com/2009/02/10/live-blogging-the-bernanke-hearing/